This was posted on the yahoo message board, also apparently out of the NY Times.
In the New York Times on 4/9/99 they talked about a ruling in Virginia against a Domain Name Speculator. The ruling has serious implications
for Network Solutions. The ruling states that registrants own their domain names like property. Network Solutions has always claimed that it
owned the domain names, which it then licensed to domain name holders. I believe Prudential used this as the basis for their terminal value
assumptions in valuing NSOL stock (each domain name is worth $300.00). If NSOL doesn't own any of these domain names, then is their
terminal value closer to 0? Here are some select quotes.
Ruling Against Domain Name Speculator
Could Set Precedent
or years people and companies have been buying Internet domain
names in the same way they purchase cars, golf clubs or meatballs.
The buyer says: Here's some money, now give me that thing you own.
But as so often happens with Internet-related legal matters, the law has
lagged behind the marketplace. Now, a state court judge in Virginia has
confirmed what most people have long assumed: domain names are a
type of property that is owned by domain name holders and may be sold
by them. But he also ruled that domain names can be seized to help pay
off a debt or a legal judgement.
......
The case also raises the question of
whether states at some point might tax domain names, as they do other
forms of property.
.....
The solution was a novel one. Umbro started a proceeding against
Network Solutions to force the judicial sale of the speculator's 27
domain names. Network Solutions denied that it held any money or
property belonging to the speculator, so Umbro sued to force the
company to turn the domain names over to the court so that the court
sheriff could auction them off to the highest bidder. The suit was brought
before the Circuit Court of Fairfax County, Virginia, home of Network
Solutions.
In a nutshell, the basic issue before the court was whether domain names
are "property" of the domain name holder that can be garnished or seized
by the sheriff for judicial sale.
In a ruling in early February, Judge M. Langhorne Keith said that domain
names were property under Virginia law, and that Network Solutions
was obligated to transfer the domain names into the court's control.
Network Solutions has previously maintained that domain name
registrants sign a contract and are given licenses to use domain names,
but do not in fact own them. The company has a lot to lose if the Virginia
case stands, legal experts said. The competitors it will face when it loses
its monopoly on domain name registrations later this year will face similar
issues.
For one thing, Network Solutions could be deluged with similar
demands for compensation through the seizure and sale of domain
names, creating administrative havoc.
Also, the ruling could put into question the propriety of the company's
dispute policy, which dictates that a domain name be automatically
withdrawn from its holder when Network Solutions receives a
complaint from a trademark owner charging that the domain name
infringes its mark. If the charge turned out to be a false one, the domain
name holder might be able to sue, saying that Network Solutions had
wrongfully taken away his property, some experts say.
"If domain names are property, then it puts into question NSI's role of
withdrawing domain names" in certain circumstances, said Oppedahl.
Bret Fausett, a lawyer with the firm of Fausett, Gaeta & Lund in Boston,
which has a large Internet practice, added: "For a small percentage of
cases, I think NSI could now be liable for taking property away and
giving it to someone else." |
